09/02/2008 (The Bangkok Post) - Policies to cut state subsidies for cooking gas could be reviewed to help contain costs for consumers, suggests new Energy Minister Poonpirom Liptapanlop.

She said that controlling household energy costs was her top priority, and that the policy introduced in mid-2007 to float cooking gas prices would be reviewed.
 
More aggressive promotion of alternative fuels and other measures would also be taken to help ease energy prices.

''Several months ago during my campaign, many housewives complained to me about the high cost of energy and that it was now too much to shoulder,'' Mrs Poonpirom said yesterday.

''Now, I have a chance to help these voters as energy minister. It is my responsibility to seek the way to help these people.''

Any move to reintroduce state subsidies on cooking gas, fuel and electricity would reverse the policies of former energy minister Piyasvasti Amranand, who favoured allowing prices to float in line with the global markets.

Price subsidies not only are costly to the public purse, they also undermine market incentives for households and consumers to conserve energy, Dr Piyasvasti has argued.

Liquefied petroleum gas (LPG) is used mainly for cooking but in recent years it had become increasingly popular as a fuel for vehicles, especially taxis.

Dr Piyasvasti argued that drivers of LPG vehicles did not deserve to be subsidised while others paid market rates to fill their vehicles' tanks. At the same time, the military-backed government was working to encourage drivers to switch from LPG to natural gas.

Under the Surayud Chulanont government, LPG prices were gradually allowed to rise starting in December 2007. Current policy would result in prices freely floating with global market prices within two years, prices are to freely float with global market prices.

Local LPG prices currently are capped based on a wholesale price of $315 per tonne, well short of global prices which hit $800 per tonne in December. Subsidy costs are borne by oil refineries and PTT Plc, the state-controlled energy giant.

PTT estimates the gas subsidy costs it around four billion baht per year.

LPG ceiling prices are currently scheduled to rise next in April by 10%, which would result in retail prices increasing by more than 0.8 baht per kilogramme from the current price of 18.21 baht.

Without the existing subsidies, LPG prices would be around 30 baht per kilogramme.

But Mrs Poonpirom played down fears that maintaining subsidies would result in supply shortages or market disruptions.

She added that she had no intention of interfering in the market by using the state Oil Fund, which was used by the Thaksin Shinawatra government to subsidise petrol and diesel prices and ran up debts of 92 billion baht in 2004-05. The debt was paid off late last year.

She said electricity prices, meanwhile, could increase by 0.05 to 0.06 baht per kilowatt-hour next month during the next revision of fuel tariffs.

Electricity prices are adjusted every four months to reflect changes in costs of fuel used by power plants.

Mrs Poonpirom said the government would not introduce a subsidy programme, but instead would rely on ''close management'' and increased promotions for alternative fuel.

One energy sector executive noted that LPG price ceilings had resulted in cooking gas prices holding at the equivalent of 20 baht per litre less than petrol prices.

The price gap has fuelled a boom in the use of LPG within the transport sector. Consumption in 2006 totalled 459,000 tonnes, up 51.6% from the year before, while consumption of gas for transport increased another 24.2% last year to 570,000 tonnes.

Higher domestic demand also caused LPG exports to drop by 55.7% last year to 256,000 tonnes. In 2006, exports fell 40% from the previous year to 576,000 tonnes.

The Energy Policy and Planing Office (EPPO) expects that if the subsidy programmes persist, Thailand would need to import LPG by 2010.

LPG prices in the Saudi Arabia market currently are quoted at $800 per tonne, down from $840 in December.